[Editor: This article is partially written by Watson Xu of web20share.com on his Chinese post, translated by XingZhen Ren from BFSU.]

group-purchaseTwitter hits $1 billion valuation within 3 years. Facebook reached equal valuation with 2 years. Groupon, however, broke the record, it only takes a year and a half. On April 19th of this year, a consortium, led by DST (a Russian investment company), invested $135 million on Groupon, making the valuation of Groupon shoot up to $1.35 billion. As New York Times said, Groupon was the craziest the Internet company in history.

The business model in Groupon is that it only sales one product or service per day, and via daily updating and bulk-discount price, Groupon is able to attract mass purchasers and then, collect 50% of the transaction commission in return. Groupon creates a new Internet business model consists of e-commerce, social marketing and online ads.

Certainly, there are many Groupon-likers in China. Those imitators copied all the virtue of Groupon, and some of them even involves its interface and model. Resource said there were already over 100 of them, but be frank, even the number is 200+, I would not be surprised. This market is already overheated and going much crazy than people expected. Some of them already raised a large bucket of money, and several deals I heard are around $5 millions; RenRen, the leading Chinese social network also launched its own group purchase site called Nuomi, and it only took hours, amazingly 152,095 users bought the offer (costs around $5.8 for 2 movie tickets, 2 coke, 1 box of popcorn and 1 Häagen-Dazs icecream).

1.  Group Purchase, New and Old business model

If you think sites like Tudou, Youku are copycats of YouTube, Renren, Kaixin001 are copycats of Facebook, I can understand that because there were no video-sharing sites, social networks sites similar to those western services in China. However, I would strongly suggest you Rethink if you believe Groupon model is 100% new for China too. In fact, Group Purchase (in Chinese it’s called Tuan Gou) is hugely popular in China especially in Home improvement/Home decoration market where thousands of people got connected online and buy the same products together in street shops in order to get a good bulk-discount. I met the co-founder of the leading group buy service site TG.com.cn weeks ago. He said his company is expecting rmb 50 millions after-tax income and getting ready for IPO. So education cost for Groupon model is, I would say, nearly zero. It is an ‘old’ model, but also ‘new’ to Chinese consumers as Groupon represents a new format of ONLINE group purchase with the interesting ‘deal of the day’ strategy. No one ever made the online group purchase experience so easy in China.

2. An easier model for Groupon-likers to survive?

Groupon is very easy to copy. But, the interesting point we have to see is that unlike video-sharing, social networks, twitter models which are all about user-base (at burning money) at the beginning, Groupon is making cash-flow since the first day. And Groupon model focus on one deal in one city, and the fact in China is that it’s not difficult to find a deal (from restaurant, spa etc) and the Internet in China is very geographic. In other words, it should be relatively easier for those startups to survive. However, if you have many targeting at the same market, then it’s all about how to do the marketing in the end. Can you offer better share with those merchants? Do you have enough money to reach more industry sectors and grow faster? Surviving is one thing, at some point, you may also need huge money to burn. (Why did Groupon raise such amount of $$$ even when it’s already hot!!)

3.  Better Service or Better Price?

I’ve read some feedback from some Chinese Groupon users. They’ve started complaining on the service they got. ‘Cheap price does not mean we also accept Cheap service’, they said. Groupons can offer you good price, but they can not guarantee whether or not the merchants are able to offer mass customers the service with the good quality. When your users come to you only for cheaper price, be careful, because that might also imply the customer loyalty is low. Especially in China, your customer can quickly move to another one with cheaper price or a big one with better service guaranteed.

4. Happy or Sad story in the end? Startups vs. Big guys

This is typically Chinese-style sad story. When those giants see the interesting new business models, instead of partnering with you or acquiring yours, they prefer to launching something on its own. Renren’s Nuomi has shown its super power with huge user base. Taobao, has launched its Groupon service on ju.taobao.com, and Dianpin (the leading Yelp-like service) has also launched its t.dianping.com. They have not started heavy promotion yet, but they are watching the market until they are fully ready and the market is more mature. So why Chinese VCs still rush for those startups? How do they expect these sites to exit one day? A few very lucky ones could take the lead in the end with enough money to burn, or one of them could be acquired by Groupon if it comes to China one day? Well, I don’t know.

nuomi

5. Innovation or just Interesting? The Groupons’ Aggregator

Given the fact that there are so many Groupon service in China and I am assuming there are more to come. So the question becomes, where to efficiently find those deals on each service. The answer is obvious, we need a search engine. Now we see the sites such as tg123.com, niutuan.com, 122.net etc the Groupon services aggregator/navigation site. I don’t know what kind of partnership involved with those groupon services aggregated, but it’s smart, isn’t? At least, it perfectly fits for Chinese!

Before you finish the reading, just for you to taste the Chinese Groupons, the following is a list of our favorites (via web20share.com).

1. Lashou – http://www.lashou.com/

  • Highlights: recently has closed $5million investment and company valuation is reported around rmb 1 billion.
  • Main Group Purchase Item: Restaurant, Pub, KTV, SPA, Hairdressing, Yoga and other selected featured firms.
  • Currently Covered Cities: Over 100 cities including Beijing, Shenzhen, Guangzhou, Nanjing, Daqing, Nanchang etc.

2. Meituan – http://www.meituan.com/

  • Highlights: it’s founded by Wang Xin, the guy also co-founded first Chinese Facebook, Xiaonei.com (now Renren.com) and first Chinese Twitter, Fanfou.com (now closed);
  • Main Group Purchase Item: Restaurant, Pub, KTV, SPA, Hairdressing, Yoga, etc.
  • Currently Covered Cities: Beijing, Shanghai, Wuhan

3. Mituan – http://mituan.com/

  • Main Group Purchase Item: Quality local living services
  • Currently Covered Cities: Hangzhou

4. Cooltuan – http://www.cooltuan.com

  • Main Group Purchase Item: Restaurant, SPA, Photography, Hairdressing, Cinema, Gym, Live CS Show, etc.
  • Currently Covered Cities: Shanghai

5. Manzuo – http://www.manzuo.com/

  • Main Group Purchase Item: Delicacy, Tour, Gym and SPA, etc.
  • Currently Covered Cities: Beijing

6. Groupon China – http://www.groupon.cn/

  • Main Group Purchase Items: Food & Beverage, Pub, SPA, KTV, Hairdressing, Yoga, Training and transaction, etc.
  • Currently Covered Cities: Beijing, Chengdu, Fuzhou, Guangzhou, Nanjing, Hangzhou, Jinan, Nanning, Qingdao, Shanghai, Shenyang, Suzhou, Tianjin, Xiamen, Taiyuan and Zhengzhou.

7. Groupon365 – http://www.groupon365.com/

  • Main Group Purchase Item: hottest, and the most fashionable and salable goods
  • Currently Covered Cities: Qingdao

8. Tuank – http://www.tuank.com/

  • Main Group Purchase Item: Restaurant, Pub, KTV, SPA, Hairdressing, Yoga and other selected featured firms.
  • Currently Covered Cities: Nanchang

9. Runtuan – http://www.runtuan.com/

  • Main Group Purchase Item: Restaurant, Pub, KTV, SPA, Hairdressing, Yoga etc.
  • Currently Covered Cities: Guangzhou

10. 55tuan – http://www.55tuan.com

  • Main Group Purchase Item: Restaurant, KTV, SPA, Hairdressing, Yoga etc.
  • Currently covered cities: Beijing